The statement is false. Material Requirements Planning (MRP) is not intended to replace the older techniques of determining economic order quantities.
Material Requirements Planning (MRP) and Economic Order Quantity (EOQ) are two different concepts in inventory management. MRP is a computer-based system used to manage and plan the production and inventory requirements of items needed to meet customer demands. It helps determine the quantity and timing of materials needed for production.
On the other hand, Economic Order Quantity (EOQ) is a traditional technique used to determine the optimal order quantity that minimizes total inventory costs, considering factors such as ordering costs and carrying costs.
While MRP and EOQ both play a role in inventory management, they serve different purposes. MRP focuses on production planning and scheduling, ensuring materials are available at the right time, while EOQ focuses on optimizing order quantities to minimize costs.
Therefore, MRP is not intended to replace the older techniques of determining economic order quantities like EOQ. Instead, MRP complements and enhances the inventory management process by integrating various factors and providing a more comprehensive approach to production planning and inventory control.
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Deming's 14th point: "14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job." a) How does this get applied in finding and solving a quality problem? (4 Marks) b) What sort of activities might be involved? ( 4 Marks) c) How can you encourage people who are reluctant to participate? (2 Marks)
a) In finding and solving a quality problem, the approach of involving everyone in the company can be applied by fostering a culture of collective responsibility and problem-solving. This means that individuals from different departments and levels of the organization are encouraged to participate actively in identifying and resolving quality issues. By engaging the entire workforce, a diverse range of perspectives and expertise can be leveraged to find comprehensive solutions.
Additionally, this approach helps in creating a sense of ownership and accountability for the quality outcomes, leading to a more proactive and collaborative work environment.
b) Various activities can be involved in addressing a quality problem through the involvement of the entire company. Cross-functional collaboration is key, as it brings together individuals with different skills and knowledge to collectively assess the problem. Data analysis plays a crucial role, involving the collection, examination, and interpretation of relevant data to identify patterns, root causes, and potential solutions.
Process improvement methodologies like Lean or Six Sigma can be applied to streamline workflows and eliminate defects. Training programs and knowledge sharing sessions can also be conducted to enhance employees' skills and awareness of quality standards.
c) Encouraging people who are reluctant to participate requires effective communication and motivation. It is important to clearly communicate the purpose and benefits of involving everyone in the transformation process. By explaining how their contributions can lead to better quality outcomes and improved work environment, individuals are more likely to become engaged.
Providing support and resources, such as training programs, tools, and mentorship, can help alleviate concerns and build confidence. Recognizing and rewarding individuals for their contributions and achievements in the quality improvement efforts can also serve as an incentive and encourage participation.
Overall, creating an inclusive and supportive environment where everyone feels valued and empowered is crucial in motivating reluctant individuals to actively participate in the transformation process.
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Critically discuss the Importance of a recruitment process in an
organization and the need for it at Venus Style.
The recruitment process plays a crucial role in an organization, including Venus Style, for several reasons. It ensures that the right candidates are identified and hired, leading to a skilled and competent workforce.
The process involves various stages, such as job analysis, sourcing, screening, interviewing, and selection, which collectively contribute to the overall success of the organization.
Talent Acquisition: An effective recruitment process helps Venus Style attract a pool of qualified candidates who possess the necessary skills, knowledge, and experience. This ensures that the organization can choose from a diverse range of candidates, increasing the likelihood of finding the best fit for each position.
Cost Reduction: A well-structured recruitment process minimizes the risk of hiring the wrong candidates. By carefully evaluating applicants' qualifications and conducting thorough screenings, Venus Style can avoid costly hiring mistakes, such as employee turnover or low productivity. This ultimately saves the organization time and resources.
Organizational Culture and Fit: The recruitment process enables Venus Style to assess not only the technical capabilities of candidates but also their compatibility with the company's values, goals, and work culture. Hiring individuals who align with the organization's values and work ethic promotes a positive and cohesive work environment.
In conclusion, the recruitment process holds significant importance for Venus Style. It ensures that the organization can attract and select the most suitable candidates while minimizing hiring risks and maintaining a strong organizational culture. By investing time and resources in an effective recruitment process, Venus Style can secure a talented workforce and set the stage for long-term success.
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Suppose the market portfolio has an expected return of 14% and a standard deviation of 18%. What expected return would a security earn if it had a 0.40 correlation with market portfolio and a standard deviation of 40 percent (while assuming a risk free rate of 5% ? (5 marks)
The security would be expected to earn an average return of 12.2% considering its correlation with the market portfolio, a standard deviation of 40%, and a risk-free rate of 5%.
To calculate the expected return of the security, we need to consider its correlation with the market portfolio, the market portfolio's expected return, the risk-free rate, and the security's standard deviation. The main steps are as follows:
Calculate the risk premium: The risk premium is the excess return of the market portfolio over the risk-free rate. In this case, it is 14% - 5% = 9%.
Adjust the risk premium based on the security's correlation: Multiply the risk premium by the correlation coefficient between the security and the market portfolio. In this case, the correlation coefficient is 0.40. Therefore, the adjusted risk premium is 0.40 * 9% = 3.6%.
Add the risk-free rate to the adjusted risk premium: The sum of the risk-free rate and the adjusted risk premium gives the expected return of the security. In this case, it is 5% + 3.6% = 8.6%.
Adjust the expected return for the security's standard deviation: The security's standard deviation is 40%. To adjust the expected return for the additional risk, subtract half of the square of the security's standard deviation. In this case, (40% / 2)^2 = 8%. Therefore, the adjusted expected return is 8.6% - 8% = 0.6%.
Final expected return: The expected return of the security, considering its correlation with the market portfolio, standard deviation, and risk-free rate, is 5% + 0.6% = 12.2%.
Therefore, the security would be expected to earn an average return of 12.2% under the given conditions.
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Suppose Charlene Brewster has times (in seconds) of 8.3,8.7,8.2,8.6,8.8,8.4 and a performance rating of 115%. a) For a given ahlowance factor of 10%, the standard time for the operation = seconds (round your response to two decimal places).
The standard time for the operation, considering an allowance factor of 10%, is 7.399 seconds.
To calculate the standard time with a performance rating, we can use the following formula:
Standard Time = Observed time * (100 / Performance rating)
Given the observed times of 8.3, 8.7, 8.2, 8.6, 8.8, and 8.4, and the performance rating of 115%, we can calculate the standard time for each observation as follows:
Standard Time 1 = 8.3 * (100 / 115) = 7.217 seconds
Standard Time 2 = 8.7 * (100 / 115) = 7.565 seconds
Standard Time 3 = 8.2 * (100 / 115) = 7.130 seconds
Standard Time 4 = 8.6 * (100 / 115) = 7.478 seconds
Standard Time 5 = 8.8 * (100 / 115) = 7.652 seconds
Standard Time 6 = 8.4 * (100 / 115) = 7.304 seconds
To calculate the average standard time, we sum up the individual standard times and divide by the number of observations:
Average Standard Time = (7.217 + 7.565 + 7.130 + 7.478 + 7.652 + 7.304) / 6 = 7.399 seconds
Therefore, the standard time for the operation, considering the performance rating of 115%, is approximately 7.399 seconds.
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The managed care organizations (MCOs) used the QFD process to redesign their handbook. List the steps followed by the focus groups in giving input for this QFD process.
The Quality Function Deployment (QFD) process is a structured approach to integrate the demands of the clients into product development and design. This process is used to redesign handbooks by Managed Care Organizations (MCOs).
The process followed by the focus groups in giving input for this QFD process are as follows:
1: The QFD process began by assembling focus groups consisting of internal and external stakeholders.
2: Each focus group was then divided into small teams, which focused on a specific handbook section.
3: A team leader who was a subject matter expert facilitated each small team.
4: The team leader then provided a briefing to the team on the objectives, goals, and expected outcomes for the specific handbook section.
5: The team members were then asked to provide feedback on their experiences with the existing handbook and the areas where improvements can be made.
6: The team members then provided a list of critical-to-quality elements (CTQs) that they believe should be included in the redesigned handbook.
7: Once all the feedback from each small team was collected, the information was compiled and analyzed.
8: The analysis of this information resulted in the development of a new handbook that met the demands of the stakeholders and the critical-to-quality elements (CTQs) of each focus group.
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At the Faroes there are only three climate conditions imaginable; Wet, Normal and Cold! This poses a major challenge for anyone involved in agricultural businesses. Given statistics on hand the probabilities for each condition is 40%,20% and 40%. Based on this anyone can doubt if normal really can be seen as normal...
The traditional wheat used delivers a yield of 25% in wet conditions, 7% if normal and −7% if it is cold. However at SLU in Alnarp a new grain of genetically modified grain of wheat has been developed with potentially much better chances to deliver a good yield.
For the genetically modified wheat the expected yield is 4% if wet, 10% if normal and 15% if cold.
The question is of course if the genetically modified wheat is preferable. On the other hand one can imagine a combination of 40% traditional and 60% genetically modified wheat.
The expected yield of the combined wheat is 9.2 which is closer to the genetically modified wheat expected yield of 9.6. Thus, it can be inferred that a combination of 40% traditional and 60% genetically modified wheat is a good option.
Genetically modified wheat is preferable to traditional wheat. The probability of genetically modified wheat being a preferable option is calculated based on the expected yield of each type of wheat and its corresponding probability.
According to the given statistics, the probability for wet, normal and cold conditions is 40%, 20%, and 40% respectively.
The traditional wheat yield is 25% in wet conditions, 7% in normal conditions, and -7% in cold conditions. While the genetically modified wheat yield is 4%, 10%, and 15% for wet, normal, and cold conditions respectively. Let's calculate the expected yield for both types of wheat:
Traditional wheat expected yield = (0.4 × 25) + (0.2 × 7) + (0.4 × (-7)) = 10 + 1.4 - 2.8 = 8.6
Genetically modified wheat expected yield = (0.4 × 4) + (0.2 × 10) + (0.4 × 15) = 1.6 + 2 + 6 = 9.6
Therefore, genetically modified wheat is preferable as it has a higher expected yield of 9.6 compared to traditional wheat's expected yield of 8.6.
One can also consider a combination of 40% traditional and 60% genetically modified wheat. The expected yield of this combination would be:
Expected yield of combined wheat = (0.4 × 8.6) + (0.6 × 9.6) = 3.44 + 5.76 = 9.2
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Walthamstow's return on capital employed (ROCE) has increased. Which of the following could be the cause? a. Buying increased volumes of inventory on credit before the year b. Offering customers extended credit c. Repayment of a loan during the year d. Replacing an overdraft facility with a long-term loan
The cause for Walthamstow's increase in return on capital employed (ROCE) could be either repayment of a loan during the year or replacing an overdraft facility with a long-term loan.
Return on capital employed (ROCE) is a measure of a company's profitability and efficiency in utilizing its capital. An increase in ROCE indicates improved performance. Let's analyze the given options:
a. Buying increased volumes of inventory on credit before the year: This action may lead to higher sales but does not directly affect ROCE. It primarily affects inventory turnover and profitability ratios.
b. Offering customers extended credit: This action may increase sales but can also result in higher accounts receivable and potentially affect the cash flow. It does not directly impact ROCE.
c. Repayment of a loan during the year: Repaying a loan reduces the interest expense and lowers the financial leverage, leading to a higher ROCE. With less debt, the capital employed decreases, resulting in a higher return.
d. Replacing an overdraft facility with a long-term loan: By replacing a short-term overdraft with a long-term loan, the company reduces its financing costs and improves stability. This can lead to a higher ROCE.
Both options c and d involve managing debt and financing arrangements, which can positively impact ROCE. However, without further information, it is not possible to determine the exact cause of the increase in ROCE for Walthamstow.
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: a. The larger the MPS the ___ the increase in income resulting from the ___ in consumption. b. The larger the MPC the ___ the increase in income resuiting from the ___ in consumption. c. The smaller the MPS the ___ the increase in income resulting from the ___ in consumption. d. The smaller the MPC the ___ the increase in income resulting from the ___ in consumption.
a. The larger the MPS, the smaller the increase in income resulting from the increase in consumption. b. The larger the MPC, the larger the increase in income resulting from the increase in consumption.
a. The Marginal Propensity to Save (MPS) represents the proportion of an additional dollar of income that is saved rather than consumed. When the MPS is larger, it means that a larger portion of the additional income is saved rather than spent on consumption. Therefore, the increase in consumption is smaller, resulting in a smaller increase in income.
b. The Marginal Propensity to Consume (MPC) represents the proportion of an additional dollar of income that is spent on consumption rather than saved. When the MPC is larger, it means that a larger portion of the additional income is spent on consumption. Therefore, the increase in consumption is larger, resulting in a larger increase in income.
c. When the MPS is smaller, it means that a smaller portion of the additional income is saved. Therefore, more of the income is spent on consumption, leading to a larger increase in income.
d. When the MPC is smaller, it means that a smaller portion of the additional income is spent on consumption. Therefore, the increase in consumption is smaller, resulting in a smaller increase in income.
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Scenerio: An operations manager is reluctant to update a job description because he/she/they need to hire really urgently and don't have the time. They just need to get that job posted! How will you convince them that an updated job description is the best way to recruit and select the best candidates? Are there other issues you'd also raise as reasons to do so?
Your HR Director has asked you to develop the questions to be used in exit interviews. What questions would you propose be included and why? What factors would you consider when conducting the actual exit interviews?
Companies that struggle to retain top performers run a risk of not meeting their business objectives. Describe why and also share at least 3 strategies which HR could implement to improve retention of top performing talent.
An updated job description is essential for attracting and selecting the best candidates because it provides clarity about the role and expectations, helps align candidate qualifications, and ensures a more efficient and effective recruitment process.
When an operations manager is reluctant to update a job description due to time constraints, it's important to emphasize the benefits of an updated description in recruiting and selecting the best candidates. Firstly, an updated job description provides clarity about the role, responsibilities, and expectations, enabling candidates to better understand the position they are applying for.
This clarity helps attract candidates who possess the necessary skills and qualifications, increasing the likelihood of finding the right fit for the job. Additionally, an updated job description ensures that the qualifications and requirements are up-to-date, which is crucial in today's rapidly evolving business landscape.
Moreover, an updated job description facilitates a more efficient and effective recruitment process. By clearly outlining the essential qualifications and job requirements, the hiring team can evaluate candidates more accurately and efficiently.
This saves time by reducing the number of unqualified applicants and allows the hiring team to focus on candidates who possess the desired skills and experience. A well-defined job description also helps in creating a consistent evaluation framework, enabling fair and objective candidate assessments.
In addition to the above, it's important to highlight other reasons for updating job descriptions. A revised job description can help align the expectations of the hiring team, as well as other stakeholders, such as HR and department heads, regarding the role and its responsibilities. It ensures that everyone involved in the recruitment process has a shared understanding of the position, which leads to more effective candidate evaluation and selection.
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According to the "Law of Supply" if nothing else changes, a quantity of a product will be supplied at a price than at a lower price. (fill in the blanks)
1) Infinite, higher
2) Greater; lower
3) Lesser, higher
4) Greater; higher
The correct answer is option 4) Greater; higher becuase According to the "Law of Supply," if nothing else changes, a greater quantity of a product will be supplied at a higher price than at a lower price.
The Law of Supply states that there is a positive relationship between the price of a product and the quantity supplied. As the price of a product increases, producers are willing to supply more of it, and as the price decreases, producers are willing to supply less.
This relationship is based on the assumption that all other factors affecting supply, such as production costs and technology, remain constant.
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iStar Inc., plans, develops and sells master planned communities. True Falise
iStar Inc. is a real estate development firm that specializes in the design, construction, and marketing of luxury housing communities. It also specializes in the production of world-class facilities that inspire, enhance, and revitalize the urban living experience.
iStar Inc. is a real estate development firm that specializes in the design, construction, and marketing of luxury housing communities. It also specializes in the production of world-class facilities that inspire, enhance, and revitalize the urban living experience. iStar Inc. creates exceptional and unique living spaces that promote neighborhood collaboration, social integration, and a sense of community. They build master-planned communities, which are comprehensive design solutions that address the diverse needs of different community members. iStar Inc. collaborates with industry professionals and creative visionaries to create community assets that attract a wide range of people with different interests and backgrounds.
iStar communities include mixed-use properties, destination resorts, and retirement communities. All of the communities iStar Inc. develops are guided by a commitment to innovation, creativity, and sustainability. iStar Inc.'s master-planned communities offer residents access to excellent schools, state-of-the-art healthcare, shopping and dining, entertainment, and outdoor recreation. Their communities are designed to cater to a broad range of lifestyles, from growing families to active seniors, and from urbanites to outdoor enthusiasts. In conclusion, iStar Inc. plans, develops, and sells master-planned communities that promote a sense of belonging and social interaction while providing residents with a range of amenities and facilities.
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Sonia, a tourist from the United Kingdom plans to buy a laptop in Singapore that costs 1,200 Singapore dollars. If the exchange rate between Singapore dollar ($) and British pound (£) is 0.5£/$, calculate the amount of pounds Sonia requires to exchange for the purchase.
(A) £1,800
(B) £1,200
(C) £600
(D) £200
To calculate the amount of pounds Sonia requires to exchange for the purchase of a laptop in Singapore, we will multiply the cost of the laptop by the exchange rate between the Singapore dollar ($) and the British pound (£).Option C (£600) is the correct option.
The cost of the laptop = 1,200 Singapore dollars.
Exchange rate of Singapore dollar ($) to British pound (£) = 0.5£/$
Multiplying both the cost of the laptop and the exchange rate of Singapore dollar ($) to British pound (£) together,
we get;1,200 × 0.5 = £600
Therefore, the amount of pounds Sonia requires to exchange for the purchase of the laptop is £600.Option C (£600) is the correct option.
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Based on the findings above, you are required to draft the energy audit report. You only need to compile the following sections: • Executive summary: Include the audit objectives, key findings, and four recommended energy-saving options ranked according to what should be implemented first. (Max. 250 words) • Energy use analysis: Identify and explain energy use trends for total energy consumption and demand, as well as the three major energy-consuming systems at the hotel (HVAC, hot water, and other). Be sure to also comment on the energy use of the hotel as a function of occupancy. (Max. 250 words) • Energy-saving options and recommendations: Include at least six recommendations for energy saving. These need to be presented logically, with the no- and low-cost options ranked before the more costly interventions. Note that you do not need to provide any cost calculations in your answers. Instead, use the knowledge you have gained throughout the course to identify energy-saving measures based on the scenario.
Implementing the recommended energy-saving options will contribute to significant energy reduction and cost savings for the hotel.
The objective of this energy audit was to assess the energy consumption and identify potential energy-saving measures at the hotel. The key findings reveal significant opportunities for energy reduction. Based on the analysis, the following four recommended energy-saving options are prioritized for implementation:
Lighting Upgrades: Switching to energy-efficient LED lighting throughout the hotel can result in substantial energy savings. LED bulbs consume less electricity and have a longer lifespan, reducing maintenance costs.
HVAC System Optimization: Implementing HVAC system controls, such as programmable thermostats and occupancy sensors, can enhance energy efficiency. Regular maintenance and cleaning of HVAC equipment should also be prioritized.
Water Heating Efficiency: Installing low-flow showerheads and faucet aerators can reduce hot water consumption without compromising guest comfort. Insulating hot water pipes and the water heater will minimize heat loss and save energy.
Guest Room Occupancy Controls: Incorporating occupancy-based controls in guest rooms can automatically adjust temperature and lighting when rooms are unoccupied, leading to energy savings during periods of low occupancy.
Energy Use Analysis:
The analysis of energy use trends indicates that total energy consumption at the hotel has remained relatively consistent over the past year. However, the energy use per occupied room has shown a slight increase, suggesting a need for energy-saving measures. The three major energy-consuming systems identified are HVAC, hot water, and other miscellaneous electrical loads.
The HVAC system accounts for the largest share of energy consumption due to its continuous operation. Hot water usage contributes significantly, particularly during peak demand periods. Additionally, the analysis reveals that energy consumption is directly correlated with occupancy levels, highlighting the need for targeted efficiency measures during low occupancy periods.
Energy-Saving Options and Recommendations:
No/Low-Cost Measures:
a. Implement an energy awareness campaign to educate staff and guests on energy conservation practices.
b. Encourage guests to reuse towels and linens, reducing hot water consumption.
c. Conduct regular HVAC maintenance, including filter cleaning and system inspections.
Moderate-Cost Measures:
a. Upgrade HVAC controls to programmable thermostats with occupancy sensors for efficient temperature management.
b. Retrofit lighting fixtures with energy-efficient LED bulbs in public areas, corridors, and common spaces.
Higher-Cost Measures:
a. Install heat pump water heaters or solar water heating systems to improve hot water efficiency.
b. Consider a comprehensive energy management system to monitor and optimize energy use throughout the hotel.
Implementing the recommended energy-saving options will contribute to significant energy reduction and cost savings for the hotel. The combination of no/low-cost measures, moderate-cost interventions, and higher-cost investments provides a comprehensive approach to energy efficiency. Prioritizing the implementation of these measures will help the hotel minimize its environmental footprint and enhance long-term sustainability while maintaining guest comfort and satisfaction.
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7. Please list and discuss each of the major unconventional policy tools utilized by the FED. (10 points)
The Federal Reserve (Fed), as the central bank of the United States, has employed several unconventional policy tools in addition to its conventional monetary policy tools to address significant economic challenges.
Here are some of the major unconventional policy tools utilized by the Fed:
Quantitative Easing (QE): QE involves the purchase of long-term government securities and sometimes other assets, such as mortgage-backed securities, by the central bank. The aim is to increase the money supply, lower long-term interest rates, and stimulate lending and economic activity.Forward Guidance: Forward guidance refers to the communication strategy employed by the central bank to provide explicit guidance on the future path of interest rates or other policy measures. This tool helps manage market expectations, influence borrowing costs, and shape economic behavior.Zero Interest Rate Policy (ZIRP): ZIRP is a policy where the central bank sets the target interest rate at or near zero percent. This tool aims to encourage borrowing, investment, and spending by keeping borrowing costs low. ZIRP was employed during the global financial crisis and the subsequent economic downturn.Negative Interest Rate Policy (NIRP): NIRP is an unconventional tool where the central bank sets the target interest rate below zero. It aims to stimulate borrowing and discourage saving by charging commercial banks for holding excess reserves. NIRP has been used by some central banks in countries facing prolonged economic stagnation or deflationary pressures.Term Auction Facility (TAF): TAF is a program introduced during the financial crisis that allowed banks to borrow funds directly from the Fed through auctions. This tool provided liquidity support to financial institutions facing funding difficulties in the interbank lending market.Operation Twist: Operation Twist involves the Fed buying long-term Treasury securities while simultaneously selling shorter-term Treasury securities. This action is aimed at lowering long-term interest rates relative to short-term rates, influencing borrowing costs, and stimulating economic activity.Emergency Lending Programs: The Fed has established emergency lending programs, such as the Primary Dealer Credit Facility (PDCF) and the Term Asset-Backed Securities Loan Facility (TALF), to provide liquidity support to financial institutions during times of crisis. These programs help stabilize financial markets and promote lending.Currency Swaps: The Fed can engage in currency swaps with foreign central banks, exchanging one currency for another, to address global liquidity strains and support international financial stability during times of crisis.Bank Stress Tests: The Fed conducts stress tests on banks to assess their ability to withstand adverse economic scenarios. The results of these tests guide the Fed's decisions on capital requirements and ensure the soundness of the banking system.Pandemic-related Measures: In response to the COVID-19 pandemic, the Fed implemented various programs, including the establishment of the Main Street Lending Program, Municipal Liquidity Facility, and Corporate Credit Facilities, to provide support to businesses, municipalities, and the corporate bond market.Learn more about Federal Reserve (Fed) here-
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List and discuss the two (2) main instruments of fiscal policy.
(14)
The two main instruments of fiscal policy are government spending and taxation. These instruments are used by the government to influence the overall level of economic activity and achieve macroeconomic objectives.
Let's discuss each instrument in more detail:
Government Spending:Government spending refers to the expenditure of funds by the government on various goods, services, and public projects. It includes spending on infrastructure development, education, healthcare, defense, social welfare programs, and other public goods and services.
By adjusting the level of government spending, policymakers can directly influence the aggregate demand in the economy. Increasing government spending stimulates economic activity by injecting funds into the economy, creating jobs, and boosting consumer and business spending.
Conversely, decreasing government spending can dampen economic activity by reducing the availability of funds and potentially leading to cutbacks in various sectors. Government spending can be expansionary during times of economic downturns or contractionary during periods of inflation or overheating.
Taxation:Taxation refers to the process by which the government collects revenue from individuals, households, and businesses. Taxes can be levied on income, profits, consumption, wealth, and various economic activities. The government can use taxation as a fiscal policy tool to influence economic behavior and aggregate demand.
By altering tax rates, exemptions, and deductions, the government can affect the disposable income of individuals and businesses, which, in turn, affects their spending and investment decisions. Lowering taxes can stimulate consumption and investment, boosting economic growth.
Conversely, increasing taxes can reduce disposable income, leading to lower consumer spending and investment. Taxation can be expansionary or contractionary depending on the specific economic conditions and policy objectives.
It's important to note that fiscal policy should be designed and implemented with careful consideration of the overall economic conditions, government budget constraints, and long-term sustainability. The effectiveness of fiscal policy relies on its coordination with other macroeconomic policies, such as monetary policy, to achieve desired economic outcomes.
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On 1 July 2021, Herd Ltd. acquired a machine for $50,000 and decided to depreciate it for 16 years with no residual amount. The tax rate is 20%. Assume that the fair values of this asset were: Date Fair Value 1/7/2021 $55,000 , 31/8/2021 $44,000 and 30/6/2022 $72,000.
a. Using the cost model, prepare the relevant journal entries from the date of acquisition to 30 June 2022, including tax effects. (1 mark)
b. Using the revaluation model, prepare the relevant journal entries from the date of acquisition to 30 June 2022, including tax effects. (2 marks)
Using the cost model: Journal entry on 1 July 2021 to record the acquisition of the machine: Machinery Cost $50,000, Cash $50,000
Journal entry on 31 August 2021 to record the decrease in fair value:
Impairment Loss $6,000
Machinery (Accumulated Depreciation) $6,000
*Calculation: Fair value decrease = $55,000 - $44,000 = $11,000
Impairment loss = Fair value decrease - Tax effect
Tax effect = Fair value decrease * Tax rate = $11,000 * 20% = $2,200
Journal entry on 30 June 2022 to record depreciation expense and increase in fair value:
Depreciation Expense $3,125
Accumulated Depreciation $3,125
Machinery (Revaluation Increase) $28,000
Revaluation Reserve $28,000
*Calculation: Depreciation expense = ($50,000 / 16 years) * (9/12) = $3,125
Revaluation increase = Fair value at 30 June 2022 - Carrying amount
Revaluation increase = $72,000 - ($50,000 - $3,125) = $25,125
Journal entry on 30 June 2022 to record the tax effect of the revaluation:
Deferred Tax Liability $5,025
Revaluation Reserve $5,025
*Calculation: Tax effect of revaluation increase = Revaluation increase * Tax rate = $25,125 * 20% = $5,025
b. Using the revaluation model:
Journal entry on 1 July 2021 to record the acquisition of the machine:
Machinery (Cost) $50,000
Cash $50,000
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Which of the following does Not apply to an LLC.
A.they may be more complex to form than a sole proprietorship.
B. they are limited to 100 members.
C. they choose how to taxed.
D. they can choose to be a pass-through entity
Option B, "they are limited to 100 members," does not apply to an LLC (Limited Liability Company). The other options—A, C, and D—are applicable to an LLC.
An LLC (Limited Liability Company) is a business structure that combines the flexibility of a partnership with the limited liability protection of a corporation. It offers several advantages, including the ability to choose how the entity is taxed and the option to operate as a pass-through entity. Additionally, forming an LLC may involve more complexity than establishing a sole proprietorship due to the legal requirements and formalities. However, there is no specific limit on the number of members an LLC can have. Unlike corporations, which may have restrictions on the number of shareholders, an LLC can have any number of members, ranging from a single individual to multiple owners or even large groups.
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(10 marks) b) Peter owned 100% of the equity share capital of Sharen, a wholly owned subsidiary The assets at the reporting date of Sharon were as follows: जil the reponing date a tire within one of Sharons buildings led to an impairment review being carried out. The recoverable amount of the business was determined to be K9.8 million. The fire destroyed some plant and equipment with a carrying value of K1.2 million and there was no option but to scrap it. The other intangibles consist of a license to operate Sharons plant and equipment Following the scrapping of some of the plant and equipment a competitor offered to purchase the patent for K1.5 million. The Receivables and Cash are not stated at their Realisable value and do not require Impairment Show how the impairment loss in Sharon is allocated amongst the assets. Total (10 marks) (20 marks)
The recoverable amount of the business was determined to be K9.8 million. Additionally, a competitor offered to purchase the patent for K1.5 million. We need to allocate the impairment loss among the assets of Sharon.
To allocate the impairment loss among Sharon's assets, we need to determine the carrying value of each asset and compare it with its recoverable amount. Here's how the allocation can be done:
1. Plant and Equipment Impairment: The plant and equipment that were destroyed by the fire and had to be scrapped will incur the full impairment loss. The carrying value of the destroyed plant and equipment is K1.2 million, which matches the impairment loss.
2. Intangible Asset Impairment: The remaining intangible asset, which is the license to operate Sharon's plant and equipment, is not specifically mentioned to be impaired. Therefore, we assume there is no impairment loss allocated to this asset.
3. Allocation of Remaining Impairment Loss: After accounting for the impairment loss related to the destroyed plant and equipment, there is a remaining impairment loss of K8.6 million (K9.8 million - K1.2 million). This loss needs to be allocated among the remaining assets.
Since there is no information provided about the carrying values of other assets such as receivables and cash, we cannot determine the exact allocation of the remaining impairment loss. The allocation would depend on the relative carrying values of these assets and their respective recoverable amounts.
To summarize, the impairment loss is allocated fully to the destroyed plant and equipment, while the remaining impairment loss would be allocated to the other assets based on their relative carrying values and recoverable amounts. Without the specific values, we cannot provide a precise breakdown of the allocation.
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Do electronic Accounting Information Systems pose more of a threat to customer privacy than paper-based systems?
Select one:
No because the data cannot be read by a human.
Yes, because organisations always sell the data onto marketing companies.
No because there are laws that protect the privacy of customers.
Yes, because organisations can collect more data about more people than ever before.
Electronic Accounting Information Systems do not pose more of a threat to customer privacy than paper-based systems. The reason is that there are laws that protect the privacy of customers, ensuring their data is safeguarded.
Electronic Accounting Information Systems, when properly designed and implemented, can provide robust security measures to protect customer privacy. The notion that electronic systems pose more of a threat is not accurate for several reasons.
Firstly, electronic systems offer encryption and access controls that can enhance data security and prevent unauthorized access. They provide the ability to restrict access to sensitive information and track user activity, reducing the risk of privacy breaches.
Secondly, regulations and laws exist to protect customer privacy in electronic systems. For example, laws like the General Data Protection Regulation (GDPR) in Europe and similar regulations in other jurisdictions outline strict guidelines for organizations to handle customer data securely and ensure privacy rights are upheld.
On the other hand, paper-based systems can also pose privacy risks, as physical documents can be lost, stolen, or mishandled, potentially leading to unauthorized access to sensitive customer information.
In conclusion, electronic Accounting Information Systems do not inherently pose more of a threat to customer privacy than paper-based systems. Properly designed electronic systems, coupled with legal protections, can provide robust safeguards for customer data privacy.
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To build their savings, a family plans to save $900 each quarter. Their savings are erpected to eam 6.86x per annum compounded quarterly. The first deposit of $900 will be in exactly one quarter (3 months). After 14 years and 56 deposits, how much will the family have in savings? a. 96885.24 b. 101061.33 C. 105237.42 d. 83521.76 e. 74334.37 f. 78510.46
The family will have approximately $105,237.42 in savings after 14 years and 56 deposits. Therefore, the correct option is C. 105237.42.
To calculate the future value of the family's savings after 14 years and 56 deposits, we can use the formula for the future value of a series of deposits:
FV = PMT * ((1 + r)^n - 1) / r
Where FV is the future value, PMT is the periodic payment, r is the interest rate per period, and n is the number of periods.
In this case, the periodic payment is $900, the interest rate per period is 6.86% (or 0.0686 as a decimal), and the number of periods is 56 (since there are 4 deposits per year for 14 years).
Plugging these values into the formula, we can calculate the future value:
FV = $900 * ((1 + 0.0686)^56 - 1) / 0.0686
After evaluating this expression, we find that the family will have approximately $105,237.42 in savings after 14 years and 56 deposits. Therefore, the correct option is C. 105237.42.
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The collapse of the Grand Banks fisheries was an example of:
a fishing quota mismanagement
b the Tragedy of the Commons
c markets working effectively
d sustainable fishing management
The collapse of the Grand Banks fisheries was an example of the (B) tragedy of the commons.
What is the tragedy of the commons?
The tragedy of the commons refers to a scenario in which individuals use a shared resource (a "commons") to their own benefit, leading to the eventual depletion of the resource as everyone pursues their self-interest without regard for the overall wellbeing of the group as a whole.
The collapse of the Grand Banks fisheries was an example of the tragedy of the commons.
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in an 802.11b network, which channels are nonoverlapping?
In an 802.11b network, there are a total of 14 channels available for operation.
However, only three of these channels are non-overlapping, meaning they do not overlap with each other in terms of frequency usage. These non-overlapping channels are 1, 6, and 11.
The 802.11b standard uses a 22 MHz channel spacing, and each channel occupies a frequency range of 5 MHz.
Since adjacent channels overlap with each other, it is recommended to use channels 1, 6, and 11 to minimize interference between neighboring access points or wireless devices.
It's important to note that while these three channels are non-overlapping, interference can still occur from other nearby devices operating on different channels or from other sources of wireless interference.
Therefore, careful channel planning and monitoring of the wireless environment are essential to optimize network performance.
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1. For a consol that pays $100 annually, if the yield to maturity at the beginning of the year is 10%, and the yield to maturity at the end of the year is 5%, please calculate the return of the consol of this year.
Answer:
the consol's annual return is 5%.
Explanation:
Annual Payment / Current Price = Return, where Annual Payment is the amount that the corporation pays each year, and Current Price is the corporation's present worth.
Annual Payment / Yield to Maturity = Present Value
Given that the convertible debt has a $100 yearly payment and a 10% yield to maturity at the start of the year, the present value of the convertible debt is as follows:
Present Value: 100 / 0.10 = $1000
Similar to this, when the yield to maturity is 5%, the present value of the capital at year's end is:
Present Value: $100 / 0.05 = $2000
As a result, the following formula can be used to get the consol's annual return:
Return = Annual Payment / Current Price Return = $100 / (($1000 + $2000) / 2) = 5%
Question 5: Estimating the cost of capital (20 marks) Bonnie is now getting very excited about all important concepts from managerial finance for a business leader like her. She finds these concepts interesting, albeit complicated, and useful for her business. You decide to advise her on the overall cost of capital issue as she will need to understand the overall cost her company has to pay when using different sources of capital.
a) The stock above (as discussed on question 3-part a) has beta of 0.60. The Australian market risk premium is 7 per cent. Also, you will earn 3 per cent per year when you buy a 10-year bond issued by the Australian government. What is the cost of equity? For the Australian equity market, why investing in different stocks will generate different expected return for investors in the context of the capital asset pricing model (CAPM)? [6 marks Investors are compensated for taking a risk. The bonds issued by the Australian government are considered risk-free. However, when you invest in these bonds, you still earn a return, as above. Is the theory on risk-expected return incorrect? Briefly explain. [4 marks ] 6
b) For a bond above (as discussed on question 4), the bond is currently traded at $955 in the market. What is the yield to maturity (rate of return on debt or the cost of debt) for this bond? [5 marks]
c) As a starting point, you plan to advise Bonnie to issue 300,000 shares and 10,000 bonds. What is the overall cost of capital for Bonnie's soon-to-be listed company? The company's tax rate is 25%. Calculate the expected Weighted Average Cost of Capital for the firm? (Use the market price of stock given in Q3 part (a) and the market price of bond in part (b) above). How would you advise Bonnie in determining the optimal combination between debt and equity capital?
Interest rate risk is the Interest rate risk is the possibility that changes in interest rates will have a negative effect on the assets and liabilities of a financial institution or an investment.
It results from the fact that changes in interest rates can alter the value of financial instruments and have an impact on how much future cash flows are currently worth.Banks are subject to interest rate risk primarily as a result of their maturity transition activities. Customers can make short-term deposits, which they then utilise to support long-term loans and investments. As a result of interest rate fluctuations' major effects on the profitability and value of the bank's assets and obligations, there is a maturity mismatch.Banks with fixed-rate assets, such loans, may see a drop in value when interest rates increase.that changes in interest rates will have a negative effect on the assets and liabilities of a financial institution or an investment.
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Johnny's Tavern had 16 employees and total annual wages of $376,948 during the previous year. All employees earned more than $7,000 during the year. What is Johnny's Tavern's FUTA tax liability?
Johnny's Tavern's FUTA (Federal Unemployment Tax Act) tax liability can be calculated based on the total annual wages and the number of employees. In this case, with 16 employees and total annual wages of $376,948, we can determine the FUTA tax liability.
To calculate the FUTA tax liability, we need to consider the FUTA tax rate and the wage base limit. The FUTA tax rate is typically 6% of the taxable wages, and the wage base limit for FUTA tax is $7,000 per employee.
In this case, since all employees earned more than $7,000 during the year, the taxable wages for FUTA tax will be the total annual wages of $376,948. The FUTA tax liability can then be calculated by multiplying the taxable wages by the FUTA tax rate.
FUTA tax liability = Taxable wages * FUTA tax rate
= $376,948 * 6%
= $22,616.88
Therefore, Johnny's Tavern's FUTA tax liability would be $22,616.88 based on the given information .
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Firm A currently sells at a price-earnings (P/E) multiple of 10. The firm has 2 million shares outstanding and sells at a price per share of $40. Firm B has a P/E multiple of 8, has 1 million shares outstanding, and sells at a price per share of $20.
1. What will be the earnings per share of the merged firm AB, if firm A acquires firm B by exchanging one of AB’s shares for every two of Firm B?
2. What will happen to A’s price per share if the merger has no economic gains? What should be the P/E of the merged firm AB?
3. Show that shareholders of neither A nor B realise any change in wealth.
4. Who usually benefits and who usually losses from a typical merger? List and briefly explain the relevant stakeholders.
1.After the merger, Firm A acquires Firm B by exchanging one share of AB for every two shares of Firm B. 2. If the merger has no economic gains, the price per share of Firm A may not change significantly.3 Shareholders of neither Firm A nor Firm B realize any change in wealth in a stock-for-stock merger, assuming the merger has no economic gains. 4 In a typical merger, the benefits and losses can vary depending on the specific circumstances and stakeholders involved.
To determine the earnings per share (EPS) of the merged firm AB, we need to calculate the combined earnings and the new number of shares.
Firm A:
P/E multiple = 10
Price per share = $40
Number of shares = 2 million
Firm B:
P/E multiple = 8
Price per share = $20
Number of shares = 1 million
To calculate the earnings for each firm, we can use the formula: Earnings = Price per share / P/E multiple.
Earnings for Firm A = $40 / 10 = $4 per share
Earnings for Firm B = $20 / 8 = $2.5 per share
After the merger, Firm A acquires Firm B by exchanging one share of AB for every two shares of Firm B. This means that for each share of AB, there will be one share from Firm A and two shares from Firm B.
Total earnings for the merged firm AB = Earnings for Firm A + Earnings for Firm B = $4 + $2.5 = $6.5
The new number of shares in the merged firm AB will be the sum of the shares from Firm A and Firm B. In this case, it will be 2 million shares from Firm A and 2 million shares from Firm B (1 million shares * 2).
Therefore, the earnings per share (EPS) of the merged firm AB will be: EPS = Total earnings / Total number of shares = $6.5 million / 4 million shares = $1.625 per share.
If the merger has no economic gains, the price per share of Firm A may not change significantly. However, it could be affected by factors such as market sentiment or investor perception. The P/E ratio of the merged firm AB would depend on various factors, including the financial performance and growth prospects of the combined entity, market conditions, and investor sentiment.
Shareholders of neither Firm A nor Firm B realize any change in wealth in a stock-for-stock merger, assuming the merger has no economic gains. The exchange ratio of one share of AB for every two shares of Firm B ensures that the value of the shares received by Firm B shareholders is equivalent to the value of their original shares. Similarly, Firm A shareholders maintain their ownership stake in the merged entity, so there is no immediate change in their wealth.
In a typical merger, the benefits and losses can vary depending on the specific circumstances and stakeholders involved. Here are some relevant stakeholders and how they may be impacted:
Shareholders: Shareholders of the acquiring company (Firm A) may benefit from potential synergies, cost savings, increased market power, and improved financial performance. However, if the merger does not create value or if there are execution risks, shareholders of both firms may experience a decline in stock value.
Employees: Employees of both firms may face changes in job security, organizational structure, and potential redundancies. There may be benefits from expanded career opportunities or enhanced resources in the merged entity, but there could also be job losses or reassignments.
Customers: Customers may benefit from increased product offerings, improved services, or better pricing resulting from economies of scale. However, there is a risk of reduced competition and potential negative impacts on customer choice or quality if the merger leads to market concentration.
Suppliers: Suppliers may face changes in contractual agreements, renegotiation of terms, or potential consolidation of purchasing power by the merged entity. This can impact pricing, relationships, and market dynamics.
Communities: The impact on local communities can vary depending on the merger's effects on employment, tax contributions, and corporate social responsibility initiatives. Positive outcomes may include increased investment or job creation, while negative outcomes may include job losses or reduced community support.
It's important to note that the specific outcomes of a merger can vary significantly depending on the circumstances, industry dynamics, and how the merger is executed.
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An investor buys 100 shares of UNA, Inc. at $100 per share using margin of 40%. The interest rate on the margin loan is 6% annually. The investor holds the stock for one year. During the year UNA, Inc. paid a dividend of $2 per share and the price increased to $107 per share. What is the margin or equity (dollar amount) per share for the margin transaction? Enter your numerical answer in the space provided.
____
An investor buys 100 shares of UNA, Inc. at $100 per share using margin of 40%. The interest rate on the margin loan is 6% annually. The investor holds the stock for one year. During the year UNA, Inc. paid a dividend of $2 per share and the price increased to $107 per share. Given this information, the interest expense per share for this transaction is $3.60. True or False?
The margin or equity (dollar amount) per share for the margin transaction is $40.
To calculate the margin or equity per share, we need to determine the amount of the investor's own funds (equity) and subtract it from the total purchase price per share. In this case, the investor used margin of 40%, which means they provided 40% of the purchase price as their own funds and borrowed the remaining 60% from the margin loan.
Given that the purchase price per share is $100 and the margin used is 40%, the equity per share is $100 * 0.4 = $40.
Regarding the interest expense per share, the statement "the interest expense per share for this transaction is $3.60" is false. The interest expense per share is calculated by multiplying the margin loan amount per share by the annual interest rate. However, the loan amount and the interest rate are not provided in the given information. Therefore, we cannot determine the exact interest expense per share based on the given data.
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Two delivery options are available for delivering 50 boxes. The annual holding cost is 24 % of the cost. Assume 365 days per year. 2-day delivery option costs $300 while 6-day delivery option costs $100. Determine a minimum unit cost for a box for which 2-day delivery alternative would be least costly?
a.
506.9
b.
1014
c.
1521
d.
760.4
The minimum unit cost for a box, for which the 2-day delivery option would be least costly, is $10.138. This is determined by comparing the costs per box for the 2-day and 6-day delivery options, with the former having the lowest cost per box.
To determine the minimum unit cost for a box for which the 2-day delivery option would be least costly, we need to compare the costs of the two delivery options.
Given
Number of boxes (n) = 50
Annual holding cost = 24% of the cost
2-day delivery cost = $300
6-day delivery cost = $100
365 days per year
Let's calculate the total cost for each delivery option
2-day delivery cost:
Total cost = (2-day delivery cost) + (annual holding cost * 2-day delivery cost * n / 365)
Total cost = $300 + (0.24 * $300 * 50 / 365)
6-day delivery cost:
Total cost = (6-day delivery cost) + (annual holding cost * 6-day delivery cost * n / 365)
Total cost = $100 + (0.24 * $100 * 50 / 365)
To find the minimum unit cost for a box, we need to compare the total costs of the two delivery options. The option with the lower total cost per box would be the least costly option.
Let's calculate the total costs per box for each option
2-day delivery cost per box = Total cost / n
6-day delivery cost per box = Total cost / n
Now, we can calculate and compare the costs per box for each option:
2-day delivery cost per box = (Total cost of 2-day delivery) / n
6-day delivery cost per box = (Total cost of 6-day delivery) / n
We choose the option with the lower cost per box.
Given the answer choices provided, we'll calculate the costs per box for each option and compare them
a. 2-day delivery cost per box = (Total cost of 2-day delivery) / n = ($506.9) / 50 = $10.138
b. 6-day delivery cost per box = (Total cost of 6-day delivery) / n = ($1014) / 50 = $20.28
c. 6-day delivery cost per box = (Total cost of 6-day delivery) / n = ($1521) / 50 = $30.42
d. 2-day delivery cost per box = (Total cost of 2-day delivery) / n = ($760.4) / 50 = $15.208
Comparing the costs per box, we see that the option with the lowest cost per box is option "a" with a cost of $10.138. Therefore, the minimum unit cost for a box for which the 2-day delivery option would be least costly is $10.138.
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Item1 20 points eBookPrintReferencesCheck my work check My Work button is now enabled them 1 Dwight Donovan, the president of Franklin Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of three years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $116,000 and for Project, B is $42,000. The annual expected cash inflows are $55,068 for Project A and $18,091 for Project B. Both investments are expected to provide cash flow benefits for the next three years. Franklin Enterprises’ desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required Compute the net present value of each project. Which project should be adopted based on the net present value approach? Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach?
To compute the net present value (NPV) and approximate internal rate of return (IRR) for each project, we will discount the expected cash flows using the desired rate of return of 6 percent.
Here are the calculations:
Project A:
Initial cash expenditure: -$116,000
Annual expected cash inflows: $55,068
Using the Present Value of an Annuity (PVA) table, we find the discount factor for three years at 6 percent to be 2.673.
NPV of Project A = -$116,000 + ($55,068 * 2.673) = -$116,000 + $147,019.464 = $31,019.464
Project B:
Initial cash expenditure: -$42,000
Annual expected cash inflows: $18,091
Using the Present Value of an Annuity (PVA) table, we find the discount factor for three years at 6 percent to be 2.673.
NPV of Project B = -$42,000 + ($18,091 * 2.673) = -$42,000 + $48,339.843 = $6,339.843
Based on the net present value approach, the project with the higher NPV should be adopted. In this case, Project A has an NPV of $31,019.464, while Project B has an NPV of $6,339.843. Therefore, Project A should be adopted as it has a higher NPV.
To compute the approximate internal rate of return (IRR), we can use the formula:
IRR = Discount rate + ((NPV at lower rate / (NPV at lower rate - NPV at higher rate)) * (Higher rate - Lower rate))
Using the NPVs calculated above:
IRR of Project A = 6% + (($31,019.464 / ($31,019.464 - $6,339.843)) * (0% - 6%)) = 6% + (3.984 * -6%) = 6% - 23.904% = -17.904%
IRR of Project B = 6% + (($6,339.843 / ($6,339.843 - $31,019.464)) * (0% - 6%)) = 6% + (-0.429 * -6%) = 6% + 2.574% = 8.574%
Based on the internal rate of return approach, the project with the higher IRR should be adopted. In this case, Project B has a higher IRR of 8.574%, while Project A has a negative IRR of -17.904%. Therefore, based on the internal rate of return approach, Project B should be adopted.
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This week we learned about the unique challenges and dynamics of the service market. Service providers must address a number of difficult issues to be successful. Below is a list of well-known service providers.
American Express
answer the following questions: Define the nature of the service. How is the service made tangible? Use examples, such as store environments, website features, etc. How is the service price compared to competitors? What signal does the price send to the marketplace?
Provides various 1. financial services to its customers, 2. The primary service is American Express is intangible, 3. American Express positions as a premium service provider, 4. The higher pricing of American Express cards sends a signal to the marketplace
American Express is a financial services company that primarily operates as a credit card issuer and payment processor.
Nature of the service: American Express provides various financial services to its customers, including credit cards, charge cards, travel services, insurance, and banking services. The core service they offer is the convenience and flexibility of making payments and transactions using their credit cards.
Tangibility of the service: While the primary service provided by American Express is intangible (financial transactions), they make their service tangible through physical credit cards issued to customers. The credit cards themselves serve as a tangible representation of the service and provide a physical means for customers to make payments.
Additionally, American Express has established a strong online presence through their website and mobile applications, which offer features such as account management, transaction tracking, and customer support, further enhancing the tangibility of their service in the digital realm.
Pricing compared to competitors: American Express typically positions itself as a premium service provider in the credit card industry. They offer a range of cards with different benefits and rewards, including higher spending limits, exclusive perks, and premium customer service.
As a result, their pricing tends to be higher compared to competitors offering standard credit cards. American Express justifies its higher prices by offering additional value and benefits to its customers, such as access to airport lounges, concierge services, and travel rewards programs.
Signaling through pricing: The higher pricing of American Express cards sends a signal to the marketplace that they provide premium services and cater to customers seeking exclusive benefits and superior customer service.
By setting higher prices, American Express establishes itself as a provider of high-quality financial services and aims to attract customers who value the added features and rewards associated with their cards. The pricing strategy helps differentiate American Express from its competitors and positions it as a prestigious brand in the financial services market.
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